Skip to main content

4 Questions Plan Sponsors Should Ask to Understand the Similarities and Differences Between 401(k) and 403(b) Plans


1. Which employers can offer a 403(b) plan?



  • Public education organizations such as public elementary and high schools, state colleges and universities, and boards of education.

  • 501(c)(3) nonprofit organizations such as private schools, research facilities, private hospitals, charities, social welfare agencies, healthcare organizations, and religious institutions.

  • Grandfathered Indian tribal governments.

  • Certain religious ministers of a church or related religious organizations.



2. Which employers can offer a 401(k) plan?


Almost any type of company may offer a 401(k) plan. Most private, for-profit companies are eligible.  Many tax-exempt, non-profit organizations have a choice between sponsoring a 401(k), a 403(b), or both.


3. How are 401(k) and 403(b) plans similar?



  • Have the same 402(g) elective deferral contribution limits. For 2016, elective deferrals cannot exceed $18,000. 

  • Allow the additional catch-up contribution for employees over age 50. For 2016, the maximum catch-up contribution is $6,000. 

  • Allow Roth contributions. 

  • Allow both elective deferrals and employer contributions.

  • Require plan sponsor oversight. 


Before new 403(b) regulations were passed, plan sponsor oversight of 403(b)s was almost nonexistent. Generally, it was much easier for 403(b) plans to be exempt from the Employee Retirement Income Security Act (ERISA), as long as they did not include employer contributions. Since the final 403(b) regulations became effective in 2009, administrative responsibilities have been imposed on 403(b) sponsors and the two plan types have become more similar.



Click to learn more about the final 403(b) regulations or visit https://www.irs.gov/publications/p571/ch04.html.


4. How do 401(k) and 403(b) plans differ?













If you have any questions, or would like to begin talking to a retirement plan advisor about whether a 401(k) or 403(b) plan would be more advisable for your organization, please get in touch by calling (800) 388-1963 or e-mail us at hbs@hanys.org.

Popular posts from this blog

Employee Benefits Offerings: What Perks Can You Add?

Employee benefits can play a crucial role in attracting and retaining top talent. Beyond compensation and bonuses, offering a variety of perks can significantly enhance employee satisfaction and productivity. But what should you include in your employee benefits offerings?   What are employee benefits?   Employee benefits encompass compensation, bonuses and various perks outside an employee's wage. By offering flexible employee benefits, you can improve employee productivity and loyalty while attracting and retaining talented candidates.   Personalized benefits examples   The type of benefits offered can vary by industry. We've compiled some of the most popular options to help you explore possible employee benefits strategies .  1. Social opportunities   Employee perks don't always have to be tied to a benefits package. Sometimes, the best way to engage your employees can be through social opportunities. Group activities can help im...
Read more

What is Risk Management? 4 Key Topics to Know

Understanding risk management in retirement programs  Managing a retirement program is complex, with multiple layers of risk. For organizations and their leadership, understanding and mitigating these risks is crucial to ensuring the long-term success and reliability of these programs.   It often leaves human resource professionals, employers and program administrators questioning, "What is risk management, and how can we excel at it?"  This blog post explores the various aspects of risk management in retirement program administration and provides actionable insights to help organizations better manage these risks.  The importance of risk management  Retirement programs are designed to benefit participants and beneficiaries, but they come with their own set of risks. These risks can be broadly categorized into four main topics:  Fees  Administration  Investments  Cybersecurity  Each of these topics requires meticulous attention and ...
Read more

Innovative employee retention strategies: 9 fresh ideas

Employee engagement and retention are pivotal in every sector, but they carry even more weight in the not-for-profit space, where resources are often limited. High turnover can be both costly and disruptive, impacting productivity and damaging morale. In an era of workforce evolution, to effectively retain their top talent, organizations must explore innovative employee retention strategies that go beyond conventional methods.  Engaged employees are distinguished by their higher productivity, motivation and loyalty, and they are more likely to stay with a company for the long term. Gallup recently updated its research article, The Benefits of Employee Engagement , finding that "low engagement teams typically endure turnover rates that are 18% to 43% higher than highly engaged teams."  In addition to turnover, disengaged employees negatively impact a company's financial health, with turnover costs averaging six to nine months of the departed employee's salary, accordin...
Read more